As a general rule, leases of land must be made by deed: see section 52(1) of the Law of Property Act 1925. However, leases for terms of up to three years need not comply with this requirement if they take effect in possession and reserve the best rent that can be reasonably obtained without taking a fine or premium: see section 54(2). In addition, agreements to create such leases need not be made in writing: see section 2(5)(a) Law of Property (Miscellaneous Provisions) Act 1989.
Hutchison v B&DF Ltd [2008] EWHC 2286 (Ch) demonstrates that these exceptions to the general rule pose risks for tenants as well as landlords. It also demonstrates that special care is required when terminating periodic tenancies.
As a general rule, leases of land must be made by deed: see section 52(1) of the Law of Property Act 1925. However, leases for terms of up to three years need not comply with this requirement if they take effect in possession and reserve the best rent that can be reasonably obtained without taking a fine or premium: see section 54(2). In addition, agreements to create such leases need not be made in writing: see section 2(5)(a) Law of Property (Miscellaneous Provisions) Act 1989.
Hutchison v B&DF Ltd [2008] EWHC 2286 (Ch) demonstrates that these exceptions to the general rule pose risks for tenants as well as landlords. It also demonstrates that special care is required when terminating periodic tenancies.
The litigation was triggered by the tenant’s decision to relocate to new premises following problems obtaining planning permission for improvements to its existing premises required by the Environmental Health Department. The tenant had not executed leases of its existing units and denied that it had entered into unconditional oral agreements to take leases of them. Alternatively, it argued that its oral agreements to take such leases were void because they were not in writing, as is required by section 2 of the Law of Property (Miscellaneous Provisions) Act 1989. It served notices purporting to give three months’ notice of its intention to vacate the units.
The landlord was able to relet four of the units and issued proceedings to recover rent and other sums from the tenant for the period up until the date of the grant of the new leases. In addition, the landlord sought an order requiring the tenant to execute leases of the units that it had been unable to relet (and to bring the rent and other sums due under those leases up to date).
The judge found in favour of the landlord. He decided that the tenant had unconditionally agreed to take three-year terms of all the units, except one. The leases reserved the best rent payable without taking a fine or premium and commenced in possession immediately. Consequently, the agreements to take the leases, and the leases themselves, were not affected by the requirements for writing or a deed.
However, the oral agreement for lease of one of the units was void because it was for a term of more than three years. As a result, that agreement fell foul of section 2 and the judge refused to allow the landlord to rely upon the doctrine of proprietary estoppel to rescue the agreement (Yeoman’s Row Management Ltd v Cobbe [2008] UKHL 55; [2008] 35 EG 142 and [2008] 36 EG 142 applied). None the less, the tenant had entered into possession of that unit and had paid rent quarterly. As a result, it had a quarterly periodic tenancy, which could be determined only in accordance with the common law rules that apply to the termination of such tenancies. The tenancy remained in force because the notice served by the tenant did not expire on a quarter day, as the common law rules require.
Allyson Colby is a property law consultant
